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Financial Services and the Road to Innovation

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Innovate or die.

That’s the message financial services (FS) organizations are
being told on a daily basis in the wake of agile Fintech start-ups disrupting
the sector. Ex-Barclays CEO Antony Jenkins is one of many to suggest that
Fintech is about to disrupt the FS sector permanently, with indications that
new technology could shrink some areas of banks’ profitability by up to 60%. Yet even though 27 per cent of senior bankers suggest tech companies are
the biggest threats to their business, many FS organisations are still
continuing to operate at the same pace, with new technology facing a slower
than anticipated uptake.

The tremors, however, are enough to have sparked change, and
as Currency Cloud CEO Mike Laven notes: 'innovation is a domino effect. While
these start-ups may not necessarily be a threat to FS organizations, the fact
that their major competitors are ready to take on some of these tricks
certainly is cause for concern.'

Out with the old and in with the new?

While some FS organizations are truly rising to the
challenge, seeing this as an opportunity to grow and innovate through change,
it often isn’t as simple as ‘out with the old and in with the new.' Being able
to completely redesign an IT infrastructure isn’t a luxury most organizations
can take on in one go, leaving many in an era of transition as they attempt to
move away from traditional IT approaches and towards a cloud-based approach.

Committed to running much of their mission critical
processes across a pre-existing IT estate, many FS organizations have built on
their existing legacy IT infrastructure, adding cloud services as an extension
or as a replacement for end-of-life solutions. Organizations are now building,
against a long-term strategy, increasingly sophisticated estates using a
variety of traditional on-premise solutions alongside external services –
including public cloud, co-location, or managed hosting services. This is
Hybrid IT.

For some, this approach has brought multiple benefits. Our
recent research found that 38% of FS organizations felt Hybrid IT
was essential for keeping on top of external regulations and compliance
requirements, while 17% of FS businesses have enjoyed greater levels of
availability as a consequence of their Hybrid IT deployment. Further still,
around half (47%) of FS organizations found that Hybrid IT could
increase business agility and 26% found it allowed for greater overall
governance of data – a critical factor for such a heavily regulated industry.
For these organizations, Hybrid IT is a step in the right direction on the road
to staying competitive in the face of innovation.

The Dark Side of
Hybrid IT

Despite over a third of FS organizations (37%)
considering Hybrid IT as a necessity in staying competitive, it seems to be
posing a threat. Ironically in a sector now so focused on keeping up with new
technologies, a worrying 48% of respondents confessed that they are now
struggling to innovate thanks to the complexity of their IT infrastructure.

Adding further insult to injury, this complexity has also
added an £158,556 per year to the FS sector’s IT bill thanks to increased
operating costs as businesses struggle to maintain IT security and data
integrity (35%), keep all aspects of the infrastructure available (30%), and ensure all platforms are interoperable (30%).

Another way…

While it’s clear that some FS organizations are missing the
mark when it comes to managing their IT, as discussed, many are reaping the
rewards. To keep the FS sector on the road to innovation, organizations must do
the following:

Plan the route to
innovation

You must know the steps you’re going to take with your IT to
keep up with the industry – and proactively plan the IT you’re going to instate
to drive innovation, rather than appearing to simply react to issues.

Recognize cloud isn’t
a silver bullet for innovation

The cloud can be great for some projects, but not all
applications are suited to this technology. Additionally there can often be
interoperability issues when the wrong cloud solutions are deployed, and
running incompatible applications can cause major problems. Thus while cloud
may seem like a one-size-fits-all route to innovation, some processes will run
more effectively on pre-existing systems: it’s vital to take all factors into
account and not rushing into the cloud can save incompatibility problems down
the line.

Familiarize yourself
with your emergency exits

Tying yourself into a cloud provider without a get out
clause is a dangerous game – what if they’re unreliable, have frequent outages
or fail to meet pre-agreed expectation. CIOs must make sure their organization
is protected and that doesn’t just mean adding another cloud supplier to the
heap. The right provider, the right
SLAs, the right KPIs and how to terminate in the event of any issues are
imperative.

Stay in control of
your IT estate

Having the right skills to manage your IT estate is integral
to being able to innovate further. While some FS organizations will have the in
house expertise to vanquish their demons without extra support, for others,
bringing in the right expertise is fundamental (as 61% of our survey
respondents revealed). Although having those specialists in-house might be the
preferred option, the wide range of platforms and technologies which comprise a
Hybrid IT estate can make this an expensive and near-impossible option. In this
instance, a Managed Services partner – whether used just to advise or to offer
full infrastructure support – can be an essential, providing the basis for
innovation at all levels of the business.

Final Thoughts

While it’s clear that a successful IT estate doesn’t come
overnight, and it’s important that FS organizations plan their attacks before
they embark to maximize their innovation strategy. Casting a light into the
darkest corners of the data centre can give a better understanding of each
application and services’ importance to the business. Not all technologies or
processes are equal, so getting to grips with the knowledge of these
requirements will help encourage a successful Hybrid IT strategy, decreasing
long term costs and most importantly, creating the right environment for
innovation.